Deadly Air Bag Crisis Deepens in Blow to Confidence

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Takata Corp. Air Bag
A company handout image showing an air bag manufactured by Takata Co., released to the media on Friday, Sept. 7, 2007. The latest developments of the air-bag crisis led to the biggest blow yet to the shares of Takata, which plunged by 23 percent today in Tokyo trading, the steepest decline since the company’s 2006 listing. Source: Takata Corp. via Bloomberg News

A deepening crisis involving deadly air bags is shaking confidence in the ability of automakers including Toyota Motor Corp. and Honda Motor Co. to ensure the safety of millions of U.S. drivers.

Toyota is advising U.S. owners to keep passengers out of front seats until defective Takata Corp. air bag parts are replaced, four months after following the same procedure in Japan. Takata faces investigations into whether exploding shrapnel from its flawed parts are to blame for at least four deaths involving vehicles made by Honda, including a Florida crash that was initially investigated as a homicide because of deep gashes to the victim’s neck.

The growing number of air-bag recalls also raise doubts about whether carmakers have learned to address defects quickly and comprehensively after General Motors Co.’s bungled ignition switch recalls and Toyota’s failures in 2009 and 2010 involving unintended acceleration. Honda is under separate probes over whether it underreported fatalities and injuries in the U.S.

“This undermines the credibility or confidence in driving, generally, and in cars,” Ashvin Chotai, managing director of researcher Intelligence Automotive Asia, said by phone. “There’s very little consumers can do about it. Of course they feel less confident about sitting in a car and they’ll be extra cautious, but beyond that, what can you do?”

The latest developments of the air-bag crisis led to the biggest blow yet to the shares of Takata, which plunged 23 percent yesterday in Tokyo trading, the steepest decline since the company’s 2006 listing. The Tokyo-based company, which started in the 1930s as a textile manufacturer, has seen its market value drop by about 100 billion yen ($1 billion) this year.

Air Bags

Takata shares were unchanged today at 1,686 yen. Toyota rose 1.7 percent and Honda gained 2.9 percent. Japan’s benchmark Topix gauge climbed 2.6 percent.

The recalls of at least 7.8 million vehicles in the U.S. tied to Takata air bags during the last two years also involve Nissan Motor Co., Mazda Motor Corp., Bayerische Motoren Werke AG and GM.

“Investors are concerned about how this safety problem will develop and now are refraining from buying stocks of those carmakers,” Hideyuki Suzuki, general manager of investment market research at SBI Securities Co., said by phone. “The Japan car industry leads the Japanese market, and if it goes the wrong way, that could impact the whole Japanese market.”

Honda, Nissan and Mazda have yet to follow Toyota in issuing warnings against sitting in front-passenger seats, a step that the Japanese carmakers took in their domestic market in June.

Improper Performance

Toyota extended this approach to the U.S. after Takata shared data that showed the inflators sent back to the supplier as part of its customers’ recalls were performing improperly. The world’s largest automaker this week called back 247,000 vehicles, including some models of the Toyota Corolla, Matrix, Sequoia and Tundra, made from 2001 to 2004.

Most of the vehicles were subject to recalls by Toyota in June this year or May 2013, said John Hanson, a U.S. spokesman for the company.

“We’re prepared to do whatever the owner asks us to do,” he said. “If the owner is afraid to drive the car, we’ll come and get it.”

Toyota began issuing the public warning against sitting in front-passenger seats of unfixed cars as the National Highway Traffic Safety Administration stepped up efforts to reach affected vehicle owners.

‘Act Immediately’

NHTSA issued a statement on Oct. 20 telling owners to “act immediately on recall notices to replace defective Takata airbags,” adding there should be particular urgency in areas of high humidity such as Florida, Hawaii, Puerto Rico and the Virgin Islands.

Honda is still examining air-bag inflators that have been replaced as part of its recalls of 5.05 million vehicles in the U.S. tied to Takata air bags the past two years, spokesman Chris Martin said.

“We will act appropriately based on the results of this investigation,” Martin said by phone. Honda is Takata’s biggest customer and has called back 6 million vehicles for problems with air bags in nine recalls since 2008. The carmaker owns 1.2 percent of Tokyo-based Takata.

Nissan doesn’t plan to disable passenger-side air bags in the U.S. and hasn’t received instructions from NHTSA to do so, said spokesman Chris Keeffe. Mazda also doesn’t plan to change its U.S. recall strategy, spokeswoman Keiko Yano said by phone.

Motorists wondering whether their cars are subject to a recall can type their vehicle identification numbers into the government’s website, www.safercar.gov.

Automaker Response

While Takata is at the center of the U.S. government’s air-bag investigation, NHTSA also is probing how the car companies responded to defects with the components.

The Center for Auto Safety, a watchdog group in the U.S., accused Honda last week of failing to report all air-bag-related injuries and deaths to a government database as required. The center’s Oct. 15 letter to David Friedman, NHTSA’s deputy administrator, also called for the U.S. Justice Department to conduct a criminal investigation into Honda’s reporting.

Honda asked a third party to begin an audit last month of potential inaccuracies in the quarterly Early Warning Reports it’s required to file to NHTSA. The automaker said in an Oct. 16 statement that it will share results of the audit with the regulator soon.

The Florida Highway Patrol said last week it’s investigating a fatality involving a Honda Accord driver stemming from neck wounds allegedly caused by an inflating air bag.

There are at least two similar incidents involving Honda vehicles. Honda said Oct. 16 it’s also examining whether a faulty air bag was to blame for the death of a man who crashed his Acura sedan in a California parking lot.

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